Life Insurance to Pay Off Bills or a Mortgage

Life_insurance_to_pay_off_mortgage_or_billsOne of the most common reasons for purchasing life insurance is to provide for your family if you are no longer around.

In addition to replacing an income, the death benefit from a life insurance policy is commonly used to pay off major bills like a mortgage, credit card debt, car loans, or unexpected medical expenses.

In this article we’ve briefly illustrated how life insurance is used to pay off debt when a family’s primary breadwinner is no longer around. We’ve also included some sample life insurance rates to help you estimate the cost of a term policy for you or your spouse.

Quick Article Guide:

1. The Event That Got Me Thinking About Life Insurance
2. Preparing to Pay Bills and the Mortgage with Life Insurance
3. Is the “Cheapest” Life Insurance Policy the Best Choice for Your Family?
4. Sample Life Insurance Rates For Males and Females Ages 40 to 75
5. Buying Permanent Life Insurance to Leave Money Behind or Pay for Final Expenses
6. What if Your Term Ends and You Still Have Debt?
7. Health Considerations when Purchasing Life Insurance
8. How Much Life Insurance Coverage is Enough?

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The Event That Got Me Thinking About Life Insurance

I didn’t have a cell phone case for some time, years even. I wanted something with style but nothing that cost too much.

Then, out of nowhere, the little voice inside my head kept telling me to get a case. I meant to – really, as soon as I found some time, I was going to get one.

But instead, I kept coming up with excuses and found any reason to procrastinate. And sure enough…it happened.

I was coming home from work and couldn’t wait to get inside to see my children. I had a lot of stuff to carry in with me and didn’t want to make two trips, so I carried it all at once.

When I got to the door, I fumbled to find my keys and just as I put my key in the lock, you guessed it, I dropped my cell phone. I can still see it now, it’s like it happened in slow motion. I saw it going down, but I couldn’t do anything to stop it. It hit the corner just right, and the face of my cell phone was shattered.

In the grand scheme of things, sure a cell phone is pretty insignificant, but this got me thinking about the other things I wanted to protect – especially my family and the people that matter to me the most. What would they do without my financial contributions to the household each month, and what would happen to our home?

Preparing to Pay Bills and the Mortgage with Life Insurance

Are you prepared to deal with the untimely loss of a loved one? How would major bills and debts be paid if the major income provider of the house suddenly passed away?

I know many men and women have asked themselves these questions, but few have decided to do something about it. Unlike my cell phone, this decision matters, and properly insuring the family can make all the difference when life throws you a curve ball.

Preparing for the worst case scenario is the only way to insure your family’s well-being. That’s what life insurance does for you. It’s the cell phone case to your family’s financial security.

With so many things to consider, how do you determine how much coverage is needed and for how long? This is the ultimate question. Proper thought and consideration must be taken when purchasing a policy, but don’t worry, we’ve broken down the basics for you.

Is the “Cheapest” Life Insurance Policy the Best Choice for Your Family?

cheapest policySo many people take the first step to get insured, only to purchase a policy that does not meet their needs. Some coverage is better than no coverage, but one of the things to consider is the term length of your policy.

The “term” of your life insurance policy is the amount of time that your rates and coverage are guaranteed for. Life insurance terms are typically 10, 15, 20, 25, or 30 years in length. Many young insurance shoppers are attracted to the low premiums of a short term policy, but this strategy often backfires.

Let me explain why.

First, life insurance gets more expensive with age. Generally speaking, you will never be healthier than you are at an early age. You certainly will not get any younger. Life insurance is based off your mortality risk, and as we get older, this increases.

Age, overall health, and weight are major factors in determining insurance premiums. Locking in a guaranteed renewable insurance policy early in life guarantees your insurability for life, and locks in low premiums for the term of the policy.

The majority of life insurance companies offer fixed rates for up to 30 years on their term policies. This means that once the policy is established, your premiums cannot increase for 30 years, regardless of any changes to your health or lifestyle.

If you pass away during the term, your beneficiaries will receive the full face amount of the policy, tax-free. A 30-year term might cost you a few more bucks now, but in the long run, it will certainly save you money even, if your health does not change.

We often receive calls from clients who intend to buy a new policy every ten years. At the age of 50, if you are in excellent health, you can probably secure $250,000 of coverage for 10 years at a cost of less than $25.00/month, but what happens when you are 60 and you still have 10-20 years left on your mortgage?

At the age of 60, you can expect your life insurance rates to be about 2 to 3x more than they were at the age of 50, assuming that you remain in excellent health.

Sample Term Life Insurance Rates For Males and Females in Excellent Health

Every life insurance company sets their own rates and guidelines, but most of the companies we represent will not penalize an applicant that is taking a preventative medication for high blood pressure, elevated cholesterol, or both.

Most life insurance companies are also very lenient with their build or BMI charts, especially for older applicants. Even if you are up to 30 pounds overweight, it won’t automatically prevent you from qualifying for a company’s lowest rates if you are in otherwise good health.

Below we’ve listed some sample rates by age and gender for applicants who are considered to be in above average health for their age.

10-Year Term Life Insurance Quotes

Age$100,000 (Male)$100,000 (Female)$250,000 (Male)$250,000 (Female)$500,000 (Male)$500,000 (Female)
*Displayed monthly rates are accurate as of 03/15/19 and are provided for illustrative purposes only.

20-Year Term Life Insurance Quotes

Age$100,000 (Male)$100,000 (Female)$250,000 (Male)$250,000 (Female)$500,000 (Male)$500,000 (Female)
*Displayed monthly rates are accurate as of 03/15/19 and are provided for illustrative purposes only.

30-Year Term Life Insurance Quotes

Age$100,000 (Male)$100,000 (Female)$250,000 (Male)$250,000 (Female)$500,000 (Male)$500,000 (Female)
*Displayed monthly rates are accurate as of 03/15/19 and are provided for illustrative purposes only.

If affordability is an issue, or if you are a cigarette smoker set on quitting in the next 10 years, buying a shorter term policy might make more sense. Remember, having some life insurance protection in place is always better than none.

Term life insurance is extremely flexible with fixed rate periods as short as one-year (annual renewable term), or five-years. However, the most cost effective term policies tend to be at 10 years or longer. Most companies offer 10, 15, 20, 25, and 30-year terms, depending on the applicant’s age.

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Buying Permanent Life Insurance for Final Expenses or to Leave Money Behind

Someone with a special needs child might want a permanent policy since the child may not ever be able to support himself or herself financially. Buying a permanent policy is also ideal for anyone who wants to leave money behind for an inheritance, to pay for final expenses, or reduce their estate taxes for future generations.

Permanent life insurance without a cash value is the best choice for anyone who needs to reduce or avoid estate taxes for their heirs. As of 2019, if your estate is worth more than $11.4 million (or $22.8 million for married couples), your loved one’s will likely owe estate taxes and inheritance taxes on the assets you leave behind.

By purchasing life insurance, the death benefit from your policy can be used to settle these taxes with the IRS or the state tax board, leaving your entire estate intact. This prevents your loved ones from selling the belongings you intended to leave behind for them.

In addition to Federal Estate Taxes, some states also impose their own estate and inheritance taxes. In Oregon for example, the estate tax exemption amount is only $1,000,000. To learn more about estate taxes in your state, please see out article, “The Complete List of States with Estate Taxes (Updated for 2019)”

One of the A+ rated life insurance carriers we work with offers 35 and 40-year term policies, but depending on your age and health profile, you may save money by buying a permanent policy instead. In addition to saving money, permanent insurance offers guaranteed rates and coverage for a longer period of time.

The most popular permanent policies do not tie up your money or require an investment value; you pay for the coverage only, just like term life insurance.

The majority of these permanent policies are customizable to fit your needs too. Permanent policies like Guaranteed Universal Life Insurance offer rates and coverage that are guaranteed until the age of 85, 90, 95, 100, 105, 110, or 121!

What if Your Term Ends and You Still Have Debt?

Although we try to plan our best for the future, not everything in life always goes according to plan. Thankfully, if you think you will still need life insurance protection after your term ends, there few options to you can exercise to extend your life insurance coverage.

The most obvious solution is to purchase a new life insurance policy when your term ends, but what if your health prevents you from qualifying for a new policy when you are older? In this situation there are two options or “riders” that most term life insurance policies offer.

Term Conversion Rider – A term conversion rider allows you to convert up to the full face amount of your term policy into permanent coverage. What’s invaluable about this option is that even if your health has taken a turn for the worse, you will be offered the same rate class you were initially approved for.

We’ve explained more about this rider in the next section, Health Considerations when Purchasing Life Insurance.

Annual Renewal Term – If your policy is annually renewable, you will have the option to renew your life insurance after the terms ends for an increased rate. Most life insurance companies will allow you to continue renewing your policy every year until you reach the age of 95.

Please Note: This is a very expensive option and it is not ideal for most. Your policy’s rates will likely triple in cost after your term expires and continue to increase each year as you get older.

Health Considerations when Purchasing Life Insurance

What if your health takes an unfortunate nosedive?

This is why it’s so crucial to make sure your term policy allows you to convert to permanent coverage if needed. The conversion option allows you to extend your coverage without proving your health or insurability.

health and life insuranceMost term life policies have a conversion option allowing you to convert the entire policy, or a portion of it, to permanent insurance. This conversion must be done before the term of your policy ends, or the maximum age allowed by your policy, whichever comes first.

The maximum conversion age I’ve seen is age 75, but with most carriers, the cut-off age is either 65 or 70. This may seem unimportant when you’re young and healthy, but we’ve converted lots of term policies into permanent coverage. In these instances, the cost of a new policy was either too expensive, or no insurance company wanted the accept the applicant’s “risk.”

What if financially, you’re in a much better place than you expected, and debt-free before the term runs out? You might ask – what happens to your life insurance once all debt is paid off?

Term Life Insurance Offers Better Flexibility

Term policies are great because if the policy is no longer needed, you can simply cancel it without any penalty. That’s why term life policies are so popular – they offer unmatched flexibility being that there are no setup or cancellation fees, only the ongoing premium while the policy is active or, in force.

Why term life insurance and not mortgage, or credit life insurance?

With all the different types of life insurance products out there, it can be difficult to find the right product. Credit and mortgage life insurance are usually some type of guaranteed issue product, which doesn’t require a medical exam. This puts far more risk on the insurance company and therefore must charge higher premiums than term life insurance. Also, with mortgage and credit life insurance, only the bank receives the payout if you die.

With term life insurance, your beneficiary will use the proceeds to pay off your debt, and can keep whatever is leftover to pay for final expenses and other miscellaneous bills.

While there are many cons to credit life and mortgage insurance, the main perk about them is that someone in poor health generally can’t be declined. However, this guaranteed acceptance comes with a heavy price tag, and there might be holes in your coverage that you didn’t consider.

This article explains a lot of the pros and cons of credit insurance. Unless you are terminally ill, term life insurance is the obvious choice for most people. If you are considering mortgage life insurance, we recommend reading this article first – you might be shocked to learn that the majority of these policies only provide you protection if you die in an accident. In other words, if you pass away from a health-related issue, your mortgage is not protected.

How Much Life Insurance Coverage is Enough?

This is a very tough question, and this decision is where most people get stuck, especially if life insurance is a foreign language to you. Everyone’s lifestyles and situations are different, but there are a few key things that many of us are looking to take care of, such as: a mortgage, credit card debt, car payments, loans from family members or friends, college expenses or student loans, loss of income, funeral costs, etc.

Most young insurance shoppers ranging from the age of 20 to 40 can get anywhere from 25 to 35 times their annual income. This life insurance can be used to replace their income until retirement age. The idea is that if you were to die today, all the years of income you would have made will be available to your family. Death of a family member is hard enough, no one should have to deal with the grief of losing a spouse and the stress of financial hardship.

By getting the correct policy, every day living costs, debts, and long term expenses can be covered. Maybe you have some insurance now but know that it’s not enough, or maybe you don’t have any insurance but you know that you need it. At JRC Insurance Group, we have experienced agents that have helped people just like you. We will walk you through the entire process, and with so many companies to choose from, we’ll make sure you get the best rates.

You can get all kinds of quotes online but depending on your health, they may or may not be accurate. If you want to get a most accurate quote, give us a call.

We’re Here to Help with Your Insurance Needs

we can helpAt JRC Insurance Group, we’ll make sure you get a policy that fits your family’s needs with a reputable company and competitive rates! Life is short, and life insurance is one of those things that is easy to keep putting on the back burner. We know we should have it, but then life gets in the way.

When we’re young and healthy and raising our family, life is crazy. Maybe first it’s soccer practice, basketball or football practice, ballet. Then there’s dinner, homework, baths and bedtime stories. And once the kids are raised, we may not be as healthy as we once were, and this affects the rates of a life insurance policy.

There will never be the perfect time. So why not bite the bullet and get it done now?

Let JRC Insurance Group help you find your policy so you can get back to living your life with peace of mind. Give us a call today toll free at 855-247-9555 or request a free quote online here. We provide a no-pressure and consultative approach to life insurance.

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Cliff Pendell

VP of Marketing at JRC Insurance Group
Cliff is a licensed life insurance agent and one of the owners of JRC Insurance Group. He has helped thousands of families of businesses with their life insurance needs since 2012 and specializes with applicants who are less than perfect health. In his spare time he enjoys spending time with family, traveling, and the great outdoors.
6 comments… add one
  • irene dudley July 10, 2015, 12:22 am

    Im a single mother of 3 adults am aged 60 and have a $320,000 mortgage over a home and an investment unit. Am healthy non smoker have very little superannuation always just thought i had mortgage protection insurance (as hadn’t borrowed money for 10yrs till 18mths ago) but i don’t!! Semi-retired doing volunteering work. What can i do for cover if i died as don’t want my children left c with a debt?

    • Randy McClintick July 15, 2015, 10:11 am

      you’re doing a nice thing, wishing to leave your family home debt-free for your children.

      We ran a few options for a healthy 60-year old female, pricing at a “Preferred” risk class. With a few questions by phone, we can determine if it’s an accurate quote for you.

      Rates and options vary a bit by the state where you reside, but for many states, Protective Life is currently pricing best.

      You didn’t state how long your mortgage is for, so we ran 10, 15 and 20 year level term options. It’s the type of policy where you get the most coverage for lowest cost. You can also cancel with no penalties if you were to sell the home, pay it off early, etc.

      $320,000 death benefit with 10 year term = $66.11 monthly

      $320,000 death benefit with 10 year term = $87.74 monthly

      $320,000 death benefit with 10 year term = $122.62 monthly

      Protective will often approve a one-time death benefit reduction, so down the road when you owe less, you should be able to reduce the death benefit to match a lower outstanding mortgage, reducing your monthly premium.

      A couple items to be aware of for “mortgage protection” insurance:

      1) If you buy it through a bank, and there are no or limited medical questions, the coverage likely covers “accidental death” only (non medical), or may have limited coverage. The Protective policy, like most term life policies requiring a free in-home medical exam, covers death for any reason other than suicide during the first two years of the policy.

      2) Mortgage insurance is usually a form of “decreasing term” insurance, and the institution owning the loan is generally the beneficiary. Owning a term life policy provides more options, and the death benefit is usually fixed. It would be better to leave your children too much, rather than not enough. Funds could be used for other expenses such as paying off other debts, possibly your medical bills, having funds to pay property taxes, etc.

      Give us a call if you’d like to discuss your situation further. We’ll be glad to guide you through the process. As a reminder, there’s no cost for our consultation or services…we’re compensated by whichever insurer our clients choose. We work with 40 top-rated/competitively priced insurers, so will find the best fit for your needs and budget.

  • Mary Davidson October 4, 2016, 12:10 pm

    I am a 64 year old female who is considered to be in good health I am considered to be a smoker although I have not had one in the last month or so, I have a $7,000 car loan and a $45,000 student loan, Regional Financial loan at $2,500 and live in the state of NC. Other than that I don’t really have anything such as a mortgage, credit cards, etc.

    • Randy McClintick October 11, 2016, 12:03 pm

      Hello, Ms Davidson,

      Thank you for your email and question. It sounds like around $50,000 of life insurance over the course of time you’re paying off bills would be sufficient. JRC works with over 40 life insurance companies, including some which are much more liberal for “light smokers” than the majority of insurers. Call us at (855) 247-9555 before 8pm Eastern and we’ll determine which are best for your North Carolina residents. We look forward to helping you!

  • Debra Caine January 22, 2018, 12:03 pm

    Hi me and my husband just brought our first home we are 55 &56 years old our home here in Alabama is 135000 health is okay we looking for a policy to payoff our home and leave money behind for anything else that’s my come up. Thanks Debra

    • Randy McClintick January 23, 2018, 12:43 pm

      Mrs. Kaine,

      Thank you for your question and visiting JRC’s life insurance website, and congratulations on becoming home owners!

      We’ll be glad to help you shop for coverage, and can offer free pre-qualification underwriting for the insurers operating in your state. When you call, provide us the length of your mortgage and currently what you’re paying monthly. If your health is good, the monthly premiums for a $250,000 death benefit term life policy may not be much more that $150,000. Some insurers allow you a one-time death benefit reduction in the future without requalifying….this many be helpful down the road when you’ve paid off a portion of your mortgage and wouldn’t need as much life insurance. You’d be able to reduce the death benefit and what you’re paying for coverage.

      JRC can be reached at (858) 247-9555 between 8am-5pm Pacific time. We look forward to helping you and your husband protect your family home.

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